First Quantum commends stability of Zambian mining policies

Global mining company First Quantum Minerals has complimented the Zambian government for the recent stability of the nation’s mining tax and royalty regime, which – if it continues – may increase investor confidence.

Moreover, First Quantum head of government affairs John Gladston commends Zambian Minister of Finance Margaret Mwanakatwe for the hard-line steps she proposed in July to handle outstanding debt in the country. He supports efforts to preserve fiscal stability and minimise mining tax regime fluctuations as this will engender increased confidence from investors. He tells Mining Weekly that Zambia’s investors have enjoyed much-needed market stability, which has significantly improved the state of mining in the country.

“One just has to look at the figures to see the improvement from the turbulent mining environment Zambia presented three years ago, with copper production in Zambia having increased by 10% in the first half of this year.”

Improved Zambian fiscal stability has had an influence in cultivating significantly higher levels of copper production from First Quantum subsidiary Kalumbila Minerals’ Sentinel copper mine operation, says Gladston. Across the Group, First Quantum produced 296 000 t of copper in the first half of 2018, with its Sentinel Mine showing a 28% increase on its year-on-year production figures over the second quarter. Sentinel Mine has further outlined that it expects its impressive production trajectory to continue for the remainder of the year, with the 2018 production figure expected to reach around 220 000 t.

Gladston states that Mwanakatwe’s mid-July announcement on the country’s planned steps to control additional debt accumulation and pay down remaining debt, showed investors “credible responsibility” and “positive forward planning”.

However, while Mwanakatwe’s approach has been noted as a welcome step in the right direction for Zambia and potential investors, improvements in Zambia’s mining sector were clearly visible before this, Gladston explains.

He chiefly attributes the improvement of mining in the country to an increase in copper commodity prices and the Zambian government’s commitment to stabilising the mining tax and royalties regime.

Three or four years ago, copper mining houses in Zambia had to deal with a number of tax regime changes in rapid succession, which were not positive, and this sent a negative message to potential investors while placing current investors under pressure, Gladston explains. Rapid legislative alterations, coupled with a decline in copper commodity prices, made for an unattractive investment destination, he adds.

However, copper prices rising steadily and government working hard through enforcing policy stability, has secured investor confidence in the country. Gladston states that First Quantum expects its Zambian mines to remain the company’s largest source of revenue for some years to come.

“Essentially, Zambia is an excellent destination to mine copper. Having historic roots in Zambia and having invested well over $5-billion in the country, this jurisdiction remains important to First Quantum.”

Keeping the Environment Positive

Gladston is adamant that the maintenance of fiscal stability in Zambia – particularly in relation to the continued stabilisation of the mining tax regime – will be paramount in encouraging new investment in the mining sector.

“Zambia as an investment destination, currently looks incredibly attractive, but temptation to tinker with the mining tax regime would be a retrograde step.”

Gladston states that the country’s current and potential investors are hoping to see “more of the same” from the country’s finance ministry in terms of stability, including local policies and ongoing governmental austerity policies. He says that the continuous provision of stability will inevitably, in the long run, reflect in new investments and projects entering the country’s mining project pipeline.

“First Quantum remains optimistic about Zambia, but – like all other investors, and other jurisdictions – it must remain vigilant over any country’s fiscal policies, particularly regarding the mining tax and royalties regime,” he concludes.